Insurance provides a safety net against some of life’s known unknowns as well as unknown unknowns. Though it is seen as a necessity in the developed world, India has been struggling to make this cover widely accessible. The top reasons are astronomical premiums and a complex claims process with a high rejection rate. In this context, it is commendable that the government has been pushing the industry oversight body, the Insurance Regulatory and Development Authority (IRDAI), to rein in skyrocketing premiums and speed up claims settlement. In the health insurance segment, premiums have spiked as much as 15 percent in recent months. Meanwhile, government data shows the country’s insurance penetration—the share of total premiums to GDP—edged down to 4 percent in 2022-23 from 4.2 percent in 2021-22.
The concerns were recently reiterated by the Union financial services secretary, M Nagaraju, who reminded insurers: “There is a need to curb mis-selling and ensure premiums are low so that coverage can increase.” He underlined that quick settlement of claims is critical to restore faith in insurance products. A recent survey showed that health insurance premiums have soared 73 percent since 2020, while medical inflation has averaged a whopping 14 percent a year. The steep rise in premiums from pre-Covid levels and rising rejection rates have pushed a larger section of consumers to opt out of coverage altogether.
An IRDAI report concedes that 11 percent of health insurance claims are usually denied, while 6 percent are kept pending for long. Apart from rejections, as many as half of all policy holders face issues such as partial approvals or delays while settling claims. To set things in order, the IRDAI needs to be well staffed and review the board decisions of insurers as a matter of routine. That things have been adrift is apparent from the fact that the regulator has been without a chairperson since this March. There is also the longstanding demand for the GST Council to waive the substantial 18 percent tax on premiums. Waiving GST for all health insurance products would be a good start towards greater affordability and broader coverage. It is high time the government removed at least some of the many hurdles in the path of this critical industry.